BBC presenter falls foul of IR35

HMRC have been successful in an appeal at the First-tier Tribunal (FTT) regarding television presenters and the Intermediaries Legislation (IR35). The FTT decided IR35 applied to the arrangements under which the BBC contracted Christa Ackroyd through her limited company, Christa Ackroyd Media Limited (CAM Ltd).

The principal issue was whether IR35 applied to the relationship between Ms Ackroyd, the BBC and CAM Ltd. Any liability if IR35 applied would lie with CAM Ltd.

The question for the FTT to consider was “if the services provided by Ms Ackroyd were provided under a contract directly between the BBC and Ms Ackroyd, would Ms Ackroyd be regarded for income tax purposes as an employee of the BBC?”

Ms Ackroyd stated she believed her employment status was self-employed and there was no liability on the part of CAM Ltd. However, the FTT made their decision on the basis that the “hypothetical contract” between the BBC and Ms Ackroyd would have been a contract of service between Ms Ackroyd and the BBC, rather than a contract for services between CAM Ltd and the BBC. HMRC contend Ms Ackroyd’s status for the purposes of IR35 is that of an employee and that CAM Ltd should account for tax and National Insurance accordingly.

The following factors indicated that Ms Ackroyd met the conditions of employee status:

• The existence of a 7-year contract with the BBC with at least 225 days of work each year and terminable only for a material breach.
• It was not realistically possible for Ms Ackroyd to make a loss in performing the contract.
• She was not in business on her own account. Ms Ackroyd was economically dependent on the hypothetical contract with the BBC which took up almost all of her working time.
• The contract dictated that any other television broadcast work Ms Ackroyd wanted to accept needed prior approval from the BBC.
• CAM Limited was prohibited from using a substitute for Ms Ackroyd.

Therefore, the FTT ruled that Ms Ackroyd failed to apply IR35 correctly and has to pay £419,151 relating to Income Tax and National Insurance determinations for the tax years 2008-09 to 2012-13 and decision notices for 2006-07 to 2012-13.

See the full case here.

Aspire Comment

It is likely that many BBC presenters are likely to fall foul of IR35 following HMRC’s win at the FTT. The FTT made it clear there are more appeals of a similar nature to come, but said it is not a lead case as such.

Although this was not a lead case that can set legal precedent, it is the first time in 7 years that HMRC have won a case regarding IR35. The victory will make way for investigations into other individuals, not only television presenters, who have used Personal Service Companies in a similar way.

If this judgement had been in relation to the 2017-18 tax year, then the outcome would have been slightly different. This is due to the introduction of the “off-payroll rules” (IR35 reform) in April 2017, whereby the responsibility for deciding whether the off-payroll rules apply would now sit with the BBC as opposed to CAM Ltd. It would have also been the BBC’s responsibility to deduct and pay tax and NI where the off-payroll rule was found to apply.